to the Government. It promotes discrepancies in matters relating to the handling of rates on the part of Government agencies, and it places an enormous administrative burden on the Government transportation agencies. I will not take the time, Mr. Chairman, to refer to the 22 views by Government agencies, the various modes of transportation, and commercial shippers supporting the repeal of section 22. I would like to move now to part X and conclude my remarks. In summing up my remarks, Mr. Chairman, that are made with regard to section 22, I can think of no better words to express the views of the conference I represent than the following statement made by one of our great transportation minds, the late Joseph B. Eastman, in testifying in support of repeal of the land-grant rate concessions to the Government: It seems to me that the Government ought to pay the same rates for carriage of traffic as are paid by its own citizens, who really make up the Government *** Mr. Chairman, on behalf of the members of the Munitions Carriers Conference, I respectfully urge that H. R. 525 be favorably considered by the members of this committee, so that this important piece of constructive transportation legislation can be acted on favorably at this session of Congress. I would like to, with your permission, Mr. Chairman, state that the National Tank Truck, the Regular Route Common Carrier, and the Irregular Route Common Carrier Conferences have asked me to include in the record their support of the Hinshaw bill, H. R. 525. Thank you, Mr. Chairman. Mr. HARRIS. All right, sir. How many members are in your organization? Mr. BURNS. We have 90 members which transport about 90 percent of all the ammunition and explosives moved for the military departments by truck. Mr. HARRIS. Thank you very much. Are there any questions? Mr. DOLLIVER. What proportion of the munitions are carried by truck? What is the division between you and the rails and the other carriers? Mr. BURNS. We don't know the most recent figures, because the diversion of tonnage to the railroads which has taken place by these destructive rate cuts is not reflected in the most recent figures available to us. We were transporting around 50 percent of all the ammunition and explosives moved by truck prior to the inception of the rate cuts by the railroads. Mr. DOLLIVER. About 50 percent? Mr. BURNS. Yes, sir. Mr. DOLLIVER. You think it is somewhat less than that now? Mr. DOLLIVER. What rejoiner do you have to the anticipated statements of the Government agencies that this repeal of section 22 is going to cost the taxpayers anywhere from one-half to 34 billion dollars? Do you have anything to say about that? Mr. BURNS. It is a difficult question to answer, Mr. Congressman. It is almost an impossible question to answer. Obviously during the transitionary period, as we experienced when the land-grant rates were repealed, there would undoubtedly be some additional expense, but there is no way of estimating what that expense would be, and when the repeal takes place, through increased and more efficient traffic management on the part of the Government traffic agencies, there is good reason to believe that the Government may, in fact, be able to reduce their expenses with regard to the available rates that are now in effect for commercial shippers. Mr. DOLLIVER. I would be glad to have you develop that thought a little. How does that follow from what you have just said? Mr. BURNS. One of the reasons, Mr. Congressman, is the fact that, as was pointed out in the Department of Defense testimony-and this same administrative burden, I assume, would apply to other Government traffic agencies-they have to receive and process to the maximum all tenders received whether they are negotiated or the unsolicited type. There were received approximately 19,000 tenders last year, all of which must receive equal treatment, whether they are solicited or unsolicited. There is an enormous administrative burden, as Mr. Smith put it, to fully process all of those tenders. Assuming that a reasonable rate pattern could be developed for the Government agencies, as we see it in the commercial field, and we have in the commercial traffic management agencies many large organizations that are the size of the Department of Defense, for example, to just use that agency, I see no particular difficulty once the interim. period between the cessation of section 22 and the inception of commercial traffic management on that small percentage of the traffic which does not move today on commercial tariff rates takes place. It is just a small aggravating period perhaps when the transition takes place and that should, in my opinion, cause no undue difficulty to get the remaining percentage now moving on section 22 rates placed on the same basis and to receive the same treatment which the commercial shippers receive today. (Mr. Burns later submitted the following supplementary statement:) SUPPLEMENTARY STATEMENT BY WILLIAM J. BURNS, MANAGING DIRECTOR, MUNITIONS CARRIERS CONFERENCE, INC., AMERICAN TRUCKING ASSOCIATIONS, INC., WASHINGTON 6, D. C., IN CONNECTION WITH H. R. 525, JUNE 8, 1956 My name is William J. Burns. I am managing director of the munitions carriers conference. At an appearance at the above-mentioned hearings on June 8, I was asked by a member of the subcommittee what rejoinder I have to the anticipated statements of the Government agencies that the repeal of section 22 would cost the taxpayers anywhere from $% to $4 billion. After analyzing the testimony of the Government witnesses, I would like to supplement my answer by stating that the $% to $4 billion additional cost anticipated by the Government would appear to be far out of line. The total domestic freight transportation bill for the Department of Defense for the fiscal year 1955, for example, as reflected in the Department of Defense testimony before this committee, amounted to only $537 million. Assuming then, as the Department of Defense stated, that the preponderance of their traffic moves today under rates, charges, and rules and regulations which are duly published by the carriers and filed in tariff form with the Interstate Commerce Commission, only a small percentage of Department of Defense traffic moves today under section 22 rates. Should section 22 be repealed, therefore, the traffic now moving under section 22 could be moved under commodity rates in tariff form where justified. As Mr. Dabney T. Waring, executive vice president of the middle atlantic conference, a freight rate and tariff agency, outlined in his statement attached to my testimony, the Government would have little difficulty in securing commodity rates on the same basis as commercial shippers where these rates could be justified. The Department of Defense witnesses did not state what percentage of military traffic moves on section 22 rates, but if we assume this percentage to be 20 percent the total freight charges paid by the Department of Defense on section 22 movements would approximate $107 million (20 percent of $537 million). Further assuming that section 22 rates are approximately 20 percent below going commercial rates on like commodities the repeal of section 22 would result in only an additional cost of $21 million (20 percent of $107 million). Much, if not all, of this figure could be decreased by the savings in the "enormous administrative burden" the Department of Defense must now incur in handling section 22 rates. Since the Department of Defense admittedly is the largest single Government shipper of transportation, it is not understood how the Government can suggest that the taxpayers must incur additional cost of anywhere from $% to $4 billion, especially since the Department of Defense and General Services Administration witnesses both have stated that the preponderance of their traffic today moves under established tariff rates. Mr. DOLLIVER. I note from your statement that you formerly were with what is now the Office of Transportation and Communications. Mr. BURNS. Yes, sir. I was in the same office as Mr. Smith, who is the director of that office today. Mr. DOLLIVER. So you have had some experience on that side. Mr. BURNS. Yes, sir. Mr. DOLLIVER. It is your considered opinion then, from what you just said, that if section 22 were repealed it would substantially reduce the administrative work on the paperwork involved in the negotiation of these separate rates? Mr. BURNS. Of the negotiation of the rates now taking place; yes, sir. Mr. DOLLIVER. Have you taken the same view as expressed by other witnesses here that section 22 is sort of a hangover from the time when there were land-grant rates, which have been repealed, of course? Mr. BURNS. To answer that question, Mr. Congressman, I have attached to this statement, which I modestly feel is the most comprehensive report on section 22 in existence today. I have gone back through the files as far as 1796 to substantiate my opinion that section 22 was never intended in 1887 to do what it is doing today. Section 22 in 1887, in my opinion, was nothing more than an extension of the rate concession philosophy that had been in existence for some 50 years prior to 1887 in the form of aid to the States, in the form of land-grant assistance during the period 1850 to 1871. Section 22 then, in my opinion, was to make lawful in the act of 1887 the provision for reduced rates which had been taking place prior to 1887 and which, through the Land Grant Act, would continue for many years subsequent to 1887, but I don't think seriously that the Congress ever envisaged the situation where, with the Department of Defense and the Government agencies the size they are today, they would be able to receive discriminatory rates as compared with those rates that are available to commercial shippers. Mr. DOLLIVER. Is there any other shipper other than the Government that is free from the rate restrictions that are in the act? Mr. BURNS. No, sir; except the State and municipal governments receive the same concessions under section 22 and intrastate move ment, but aside from the charitable organizations and those other organizations that are mentioned in section 22 today, there is no other organization of comparative size that receives the rate concessions that are received by the Government today. Mr. DOLLIVER. Would a repeal of section 22 eliminate any possibility of State or municipal organizations from bargaining for their rates? Mr. BURNS. As I recall the Hinshaw bill, it would repeal those provisions which allow rate concessions to the State and municipal governments. Mr. DOLLIVER. Thank you, Mr. Chairman. That is all. Mr. HARRIS. Are there any further questions? Mr. HINSHAW. Yes, I just want to ask one question. Supposing section 22 in respect to these rates is abolished. How do you suppose fast action can be gotten under section 6? How long would it take to establish the rate? Mr. BURNS. To change over from section 22 to tariff rates? That would be difficult. I wouldn't want to be presumptuous to estimate without giving it further thought. It would take some time. It would require considerable thought on the part of the many agencies involved to come up with what I think would be a fair period of time. Mr. HINSHAW. Reorganizing the rate structure, you mean? Mr. HINSHAW. I am simply asking about how long it would take to get a new rate established under section 6? Mr. BURNS. It wouldn't take long at all. Mr. HINSHAW. It has been guessed around here anywhere from 1 to 3 days. Mr. BURNS. It could be done in 1 day under section 6 (3) of the Interstate Commerce Act. The rates could be changed in as little as 1 day's notice, provided the rates can be justified. It wouldn't take long at all to change the section 22 rates to commodity rates if it could be justified. Mr. HINSHAW. I wouldn't think it would take much longer than it would to establish a section 22, but that is anybody's guess. That is all, Mr. Chairman. Mr. HARRIS. Thank you very much, Mr. Burns. We are very glad to have your statement. Mr. BURNS. Thank you. Mr. HARRIS. Mr. Harry R. Brashear. I believe you are the director of the traffic service, Aircraft Industries Association. STATEMENT OF HARRY R. BRASHEAR, DIRECTOR, TRAFFIC SERVICE, AIRCRAFT INDUSTRIES ASSOCIATION Mr. BRASHEAR. That is correct, Mr. Chairman. I have prepared a statement and I would like to have it incorporated into the record without reading it. Mr. HARRIS. Yes, you may have it incorporated in the record. (The statement referred to follows:) STATEMENT OF HARRY R. BRASHEAR ON H. R. 6141, H. R. 9548, H. R. 9771, AND H. R. 9772 H. R. 6141 My name is Harry R. Brashear and I am director of traffic service of the Aircraft Industries Association of America, Inc. This association is a trade organiza tion of the manufacturers of aircraft and components entering into the construction of aircraft. My duties consist of coordinating individual efforts designed to secure for the industry an expeditious and economical transportation service. While there are some provisions of H. R. 6141 to which we are opposed, this organization emphatically endorses the stated objectives of the President's Cabinet Committee report, namely: 1. Increased reliance on competitive forces of transportation in ratemaking in order (a) to have transportation enterprises function under a system of dynamic competition which will speed up technical innovation and foster the development of new rate and service concepts; and (b) to enable each form of transport to reflect its abilities in the market by aggressive experimentation in rates and service in order to demonstrate to the full its possibilities for service to the shipping and traveling public; 2. Maintenance of a modernized and financially strong system of common carrier transportation; 3. Encouragement of increased efficiency and economy in the management of all transportation services in order to give the ultimate consumer the benefit of the lowest possible transportation costs; and 4. Development of an efficient transportation system for defense mobilization or war. For the past half a century the whole tendency has been to increase the degree of regulation imposed on carriers and to give to the Interstate Commerce Commission ever greater powers. Although there have been many statements appearing in the public press urging a reduction in regulation in recent years, the Cabinet Committee report is the first document issued by a responsible group of persons which has submitted a tangible plan for reduced regulation. Historically it should be noted that in the last quarter of the 19th century the railroads of this country sought by various means to curtail competition. The pooling of traffic and earnings was resorted to but that became so unpopular with the public that it was declared unlawful and forbidden in the original act to regulate commerce passed in 1887. Subsequent to that act and in their continued efforts to control competition, railroads entered into association agreements which provided for the imposition of fines on those members who broke agreements made in these associations. In the famous Trans-Missouri case, decided in 1897, the Supreme Court held that the imposition of fines for departing from association agreements was in restraint of trade and was declared unlawful. At the turn of the century the railroads of the United States operated under the most intensely competitive conditions in their history. Highly respected members of the Intestate Commerce Commission have referred to the conditions which then obtained as the law of the jungle, a phrase highly cherished since by carrier advocates of intense regulation. The year 1902 was the last full year prior to the beginning of the enactment of a series of laws which greatly curtailed railroad competition. The first of these was the Elkins Act, passed in 1903, making the giving or solicitation of a rebate in rail charges a crime. Notwithstanding the intense competition which prevailed in 1902, the principal railroads of the United States were in excellent physical and financial shape. An inquiry directed to the Wall Street Journal some years ago brought this interesting information. On the New York Stock Exchange, Lake Shore & Michigan Southern Railroad stock during the year 1902 ranged from $340 high to a $325 low. The Lake Shore & Michigan Southern is that part of the present New York Central Railroad extending from Chicago to Buffalo through Toledo and Cleveland. New York Central & Hudson River Railroad stock ranged from a high of $168% to $147, while Pennsylvania Railroad stock ranged from $170 to $147. The Hepburn amendment to the Interstate Commerce Act, passed in 1906, more than anything else created the monopoly of railroad transportation often heard in the discussions of the Cabinet committee report. Prior to its passage a railroad could reduce a rate on 3 days' notice to the Commission. Under it the so-called midnight tariff flourished and railroads could file a rate, move the business and permit the rate to expire before a competitor knew what happened. Association agreements were ignored. The Hepburn Act of 1906 required 30 days' notice to the Commission for any change in rates. Cut rates disappeared and the objectives which the railroads so diligently but unsuccessfully labored for in the previous quarter of a century was realized by this simple enactment. It was natural under these conditions that railroad agreements then became binding and more than anything else did this destroy the incentive to progress, under managerial initiative born of competitive conditions. |